Daily Currency Update

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Loonie Rally's Ahead of the BOC Monetary Policy Report Tomorrow

CAD - Canadian Dollar

The Band of Canada tomorrow will release its monetary policy report along with an interest rate decision followed by a press conference. Market participants do not expect the central bank to lower rates further from the 0.25% but will look for Governor Poloz to add further economic stimulus measures to alleviate the economic downturn in the domestic economy from COVID-19. Last week we saw the Federal Reserves in the US add to their monetary policy platform, which prompted a broader USD correction, promoting further CAD upside. The Fed issued another round of emergency monetary policy measures geared to prop up an economy plunging into a recession. The new program is designed to invest a further 2.3 trillion into small and mid-sized businesses, support local and state government stimulus measures and prop up sub-investment grade securities. While met with some criticism and suggestion the Fed was creating an environment primed for moral hazard more action is needed as US jobless claims pushed through 16million and unemployment is tipped to reach 10% before the end of the month.While COVID 19 remains front and centre, attention is beginning to shift toward the economic landscape. The IMF is predicting the worst recession since the Great Depression, with over half of its 189 member countries already seeking financial aid.

Key Movers

The US dollar struggled throughout the Easter break, having been forced lower in the wake of the Fed's new emergency monetary policy measures. Record levels of monetary policy support have led to an increased supply of USD within global financial markets through the last four weeks, easing liquidity concerns and prompting a short-term USD sell-off. While risks to the greenback remained skewed to the downside in the short term, the rally across key counterparts like the AUD and CAD may be running out of steam as attentions shift back toward traditional macroeconomic data sets. The uncertainty that surrounds the economic impact of coronavirus and the success of national exit strategies will likely prompt another run of heightened volatility in the months ahead as economies attempt to deal with extensions in social lockdown measures, low growth, muted inflation and widespread unemployment pressures.

Expected Ranges

USD/CAD: 1.3862 -1.3925 ▲

GBP/CAD: 1.7369 - 1.7503 ▲

EUR/CAD: 1.5149 - 1.5264 ▲

AUD/CAD: 0.8872 - 0.8921 ▲

NZD/CAD: 0.8436 - 0.8502 ▼

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